In Europe, indices traded lower on the day, but better than expected UK GDP, Germany retail sales and France consumer spending propelled big gains for continental currencies, particularly EUR, CHF and NOK. CAD started the day off strong propelled by stronger than expected Canadian GDP but reversed and fell back as USD rebounded during the day along with SGD, AUD and NZD. Press reports Atlanta Fed President Lockhart still thinks three rate hikes this year are possible but likely not four may have been used and an excuse for a trading bounce. Tomorrow we could see more hawkish talk from Cleveland Fed President Mester, but unless there’s a big change in the data, Fed Chair Yellen’s comments may continue to override everyone else outside of intraday trading fluctuations.
Nonfarm payrolls are due Friday morning but in the wake of comments from Fed Chair Yellen and other FOMC members this week, it would likely take a lot to change speculation away from the current party line of 2 rate hikes this year with the next one most likely in June. It would likely take growth above 300K to set a more hawkish tone and a negative reading to make the tone any more dovish than it already is.
The street is expecting a 205K increase in payrolls down from 242K last month. ADP payrolls were 200K even beating the street by 5K, but jobless claims have been rising over the last month although still well below 300K. Based on all of this I think we’ll see a 10K downward revision to last month and 220K payroll growth. This would keep the US in the Goldilocks groove of job growth strong enough to maintain confidence in the US economy and keep recession talk at bay but not too strong which would put pressure on the Fed to raise interest rates sooner.
The other main focus today is on manufacturing PMI reports from around the world, the first broad based look at how economies have been performing in March. In particular, traders may focus on China’s numbers looking for signs of which way it’s economy is heading after the market turmoil of the last quarter and at Europe for confirmation or rejection of recently improving economic indicators. Japan may also be a focus today with traders looking for indications from the manufacturing PMI and Tankan manufacturing surveys as to whether negative interest rates have had any impact on the economy or expectations.
Corporate News
Starwood Hotels Ambang has dropped out of the takeover battle, leaving Marriott as the top suitor.
Economic News
Significant announcements released overnight include:
US Chicago PMI 53.6 vs street 50.8 and previous 47.6
US natural gas (25 BCF) vs street (20 BCF)
US jobless claims 276K vs street 265K
Canada Jan GDP over month 0.6% vs street 0.3%
Canada Jan GDP over years 1.5% vs street 1.1%,
Canada Dec GDP over year revised up to 0.6% from 0.5%
UK Q4 GDP update 2.1% vs street 1.9%
UK Lloyds Business Barometer 43 vs previous 28
UK GfK consumer confidence 0 vs street (1)
Germany unemployment change 0K vs street (6K)
Germany unemployment rate 6.2% as expected
Germany retail sales 5.4% vs street 2.2%
Spain retail sales 3.9% vs street 4.0%
Norway retail sales (0.5%) vs street (0.2%)
Greece retail sales (3.8%) vs previous (0.2%)
Eurozone consumer prices (0.1%) as expected
Eurozone core CPI 1.0% vs street 0.9%
France consumer prices (0.2%) vs street (0.1%)
Spain consumer prices (0.8%) as expected
Italy consumer prices (0.3%) vs street (0.2%)
France consumer spending 1.8% vs street 0.9%
Japan housing starts 7.8% vs street (2.4%)
Japan construction orders (12.4%) vs previous (13.8%)
Australia new home sales (5.3%) vs previous 3.1%
NZ ANZ activity outlook 29.4 vs previous 25.5
NZ ANZ business confidence 3.2 vs previous 7.1
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
10:50 am AEDT Japan Tankan Large Mfg Index street 8 vs previous 12
10:50 am AEDT Japan Tankan Large Mfg outlk street 7
4:30 pm AEDT Australia commodity index previous (21.6%)
7:00 am BST UK Nationwide house prices street 5.1%
9:00 am BST Italy unemployment rate street 11.5%
10:00 am BST Eurozone unemployment rate street 10.3%
8:30 am EDT US Mar nonfarm payrolls street 206K
8:30 am EDT US Feb nonfarm payrolls revised from 242K
8:30 am EDT US payrolls net 2M revision previous 30K
8:30 am EDT US private payrolls street 190K vs previous 230K
8:30 am EDT US unemployment rate street 4.9%
8:30 am EDT US average hourly earnings street 2.2%
8:30 am EDT US participation rate previous 62.9%
10:00 am EDT US construction spending street 0.1% vs previous 1.5%
10:00 am EDT US consumer sentiment street 90.5
12:00 pm EDT FOMC Mester speaking
1:00 pm EDT US Baker Hughes drill rig count previous 464
Manufacturing PMI reports:
9:30 am AEDT Australia previous 53.5
12:00 pm AEDT China official street 49.4 vs previous 49.0
12:00 pm AEDT China non-manufacturing previous 52.7
12:45 pm AEDT China Caixin street 48.3 vs previous 48.0
1:00 pm AEDT Japan Nikkei previous 49.1
9:30 am BST UK street 51.2
8:55 am BST Germany street 50.4
8:50 am BST France street 49.6
8:15 am BST Spain street 54.0
8:45 am BST Italy stret 52.5
7:30 am BST Sweden street 52.8
8:00 am BST Norway street 48.0
8:00 am BST Poland street 52.6
9:00 am BST Greece previous 48.4
9:30 am EDT Canada previous 49.4
9:45 am EDT US Markit street 51.5
10:00 am EDT US ISM street 50.8 vs previous 49.5
10:00 am EDT US ISM new orders previous 51.5
Colin Cieszynski